IT, pharma to gain amid rupee depreciation: Dipan Mehta

In a chat with ET Now, Dipan Mehta, Member BSE and NSE, shares his views on markets.

ET Now: What is your call on Ranbaxy?

Dipan Mehta: There are better stocks in the pharmaceutical sector to invest. Investor should take this price and move on because the problem that Ranbaxy just do not seem to be ending and every day new negative news flow has come into limelight and that kind of damages the sentiment.

At the same time pharmaceuticals are going to be an outperformer going forward so if you are a non-performing stock it is only sensible that you move to a more performing stock within the same sector and stick with the large cap companies like Sun Pharma, Dr. Reddy that have all delivered very good returns and going forward.

Also, there is a degree of probabilities that they will continue to deliver good returns going forward. It is better to make a switch than stick to Ranbaxy because one does not know what the next news flow could be and it could be even more negative. It is better to focus on some of the performers.

ET Now: What do you think is ailing the jewellery stocks today, there were talks of some more rates conducted at some of the dealers, couple of names flashed as well not of the listed stocks but of the intermediate dealers?

Dipan Mehta: One cannot speculate over what rumours are floating in the market but all that we can surmise is that there is a change in the business model since the RBI made those rules about gold leasing so to that extent their business models have become slightly more riskier.

At the same time, seasonally also they are entering a kind of a lean period so to that extent the quarterly numbers will get impacted and these stocks have run up significantly in the past year or so. So some kind of natural correction also is taking place, in any case we were never too fond of the jewellery companies with the exception of Titan. Most of them are newly listed and untested as far as the listing track record is concerned or as far as their policies towards minority shareholders are concerned. A few of them also have corporate governance issues, so investors who invested in them were clearly playing in very risky waters and now that the correction is taking place, they only themselves have to blame but from this point.

Also, these companies do not make much of attractiveness in terms of investment and even at these levels investors could look at lightning upon them but Titan could be a completely different proposition altogether and with the correction which has come through in the stock that it is a good candidate for buy and slightly buy at lower and lower levels average lower and hold for the long term because the overall prospects have certainly have not diminished.

It is just that the business model has slightly undergone rather these kind of methodology of purchasing gold will undergo a change and some amount of margin erosions may take place but the growth story as far as the top line is concerned certainly remains intact.

ET Now: We spoke about ITC but consumption has taken a bit of a knock United Spirits is down close to 5% in trade today same for Jubilant. Is it time that some of these stocks could see a PE derating and if so which one would you be more skeptical about?

Dipan Mehta: We are seeing money move out of the consumption, domestic oriented story is more towards the export oriented businesses and we are seeing lot of money flowing into IT as well as pharmaceutical and that is natural given the rupee where the level at which it is. Some of the consumption story is also going to get impacted by higher inflation going forward because of the deprecation of the rupee.

It make sense to kind of lighten up on the consumption oriented stocks, some of the domestic oriented stocks and move to export oriented companies and that is the beauty of the Indian markets that it offer so much of a variety that you can shift from companies which are focusing on local buying, local consumption to companies which benefit from exports and the weak rupee is going to benefit them.

You would see a slight PE derating over there and may be because of base level as well as overall slowdown in the economy the top line performance also may come under pressure. So markets rightly justified in trading these stocks lower but there are other choices and investors could focus over there.